By Ethan Faverino |
The National Federation of Independent Business (NFIB) released a new report detailing the significant economic benefits and tax savings Arizona’s 706,640 small businesses will realize now that the 20% Small Business Tax Deduction has been made permanent.
The report also outlines additional federal tax relief measures signed into law that will support small business growth across the state.
According to the report, making the deduction permanent is projected to generate 26,000 new jobs annually in Arizona over the next 10 years, along with an annual increase in state GDP of $1.4 billion during the first decade. After 2035, the benefits grow even larger, with an expected $2.9 billion annual increase in state GDP and 49,000 new jobs created each year.
Nationally, the permanent deduction is expected to add 1.2 million jobs and $75 billion to U.S. GDP each year for the first 10 years, rising to 2.4 million jobs and $150 billion in annual GDP growth beyond 2035.
“Making the 20% Small Business Deduction permanent was a landmark win for Main Street — and Arizona small businesses are already seeing that benefit,” stated NFIB State Director Chad Heinrich. “But the conformity fight isn’t over, and every provision Arizona fails to adopt is a tax increase on hardworking small business owners.”
Since 2017, the Small Business Tax Deduction has allowed pass-through businesses to deduct up to 20% of their qualified business income. This relief has enabled small businesses to expand operations, hire more workers, invest in employees, and strengthen their communities. The deduction was originally scheduled to expire at the end of 2025, which would have resulted in a significant tax increase on nine out of ten small businesses.
On July 4, 2025, President Trump signed legislation making the 20% Small Business Tax Deduction permanent. This action provides long-term certainty for small business owners, allowing them to retain more of their earnings to reinvest in their operations rather than sending additional funds to federal and state governments. It also helps level the competitive playing field against larger corporations.
In addition to the 20% deduction, the legislation includes several other key provisions. The Section 179 small-business expense deduction was doubled from $1.25 million to $2.5 million and will now be indexed for inflation, allowing businesses to immediately deduct the full cost of qualifying equipment and property.
The 100% bonus depreciation under Section 168(k) was permanently restored, enabling businesses to fully deduct the cost of qualified property in the year it is placed in service rather than spreading depreciation over many years.
Lastly, the estate tax exemption was permanently increased to $15 million for individuals and $30 million for married couples filing jointly, with inflation adjustments. This change helps family-owned small businesses avoid being forced to sell or liquidate assets to pay taxes upon the owner’s death.
Ethan Faverino is a reporter for AZ Free News. You can send him news tips using this link.
